New watchdog will monitor banking standards in the UK

A new body – Banking Standards Review Council (BSRC) – will monitor standards in the UK banking industry, it has been announced after Sir Richard Lambert’s report.

The past few years have been difficult to say the least for the banking industry. With the Libor-fixing scandal, mis-selling of payment protection insurance (PPI) on loans, million-pound bonuses and the headlines that came out of the credit crunch, public trust in banks has slumped and it is agreed by the majority that something has to change.

Sir Richard Lambert’s report on standards in the banking industry has delivered on its promise to come up with mechanisms to promote better conduct in the industry, and Bank of England governor Mark Carney announced the UK will introduce a new banking standards body by the end of the year.

BSRC will be chaired by Sir Richard himself until a permanent chair is recruited by Mr Carney and a panel of figures from outside the industry. Although the new organisation will be funded by the banking industry, it is intended to be independent from other institutions – but they will only be required to sign up on a voluntary basis.

That said, major lenders such as Barclays, HSBC, RBS, Santander, Lloyds Banking Group, Nationwide and Standard Chartered have already signed up, and Mr Carney is urging other lenders to do the same.

BSRC will run training programmes for bankers and set up a code of conduct for professionals in the industry. Participating banks will be expected to commit to improving their culture and practices. Then not only will they have to report their progress to the watchdog, but it will publish its own annual report setting out how each bank of performing and where there is room for improvement.

“We need a financial system that is safe, fair and acts with integrity,” said Mr Carney. “The Bank of England is doing its part to ensure safety and soundness.

“Integrity, however, cannot be regulated. It must come from within. Only exemplary behaviour can confer the social licence necessary for our banks to be active participants in ensuring that the UK financial system remains a global good and a national asset.”

After waves of scandal it is understandable that banks are anxious to be seen as responsible and committed to change. But how far the sector is willing to accept restrictions may not become clear until BSRC is finally up and running.